4.DISCONTINUED OPERATIONS:

IT Infrastructure Management business

On May 20, 2015, the Company announced it had entered into a definitive agreement to sell its IT Infrastructure Management business (“ITO”) to Charlesbank Capital Partners and M/C Partners. The sale was completed on July 31, 2015. Beginning in the current fiscal quarter, the Company began reporting the results of operations, cash flows, and the balance sheet amounts pertaining to ITO as a component of discontinued operations in the condensed consolidated financial statements. Prior to the discontinued operations classification, the ITO business unit was included in the IT Infrastructure Management segment in the Company’s segment results.

At the closing of the transaction, the Company received approximately $133 million in cash ($140 million stated sales price less closing adjustments of $7 million). Also, the Company may receive up to a maximum of $50 million in contingent payments subject to certain performance metrics. In addition, the Company received a 5% retained profits interest in the divested entity, subject to a defined value over which the Company will participate in profits.

On July 31, 2015, the Company applied $55 million of proceeds from the sale to repay outstanding Company indebtedness in order to comply with the Company’s existing credit agreement (see Note 8). The Company plans to use further proceeds from the sale to fund expansion of its common stock repurchase program and for general corporate purposes. The Company expects to report a gain on the sale.

The Company also entered into an agreement to amend its credit agreement. The effectiveness of the amendments contained in the agreement are conditioned on, among other things, the closing of the ITO disposition. Once the ITO disposition is completed and the amendment becomes fully effective, certain financial covenants in the credit agreement will be modified for the fiscal quarters ending on September 30, 2015, December 31, 2015 and March 31, 2016 (see Note 8). Additionally the Company will not be entitled to declare or pay any dividends during this time and share repurchases will be limited to no more than $100 million depending on the Company’s leverage ratio. After March 31, 2016, the debt covenants and dividend and share repurchase limitations will return to the requirements in the credit agreement in effect prior to the amendment. In addition, the amendment revises certain definitions in the credit agreement to clarify the effect of acquisitions and dispositions on certain financial covenants.

Summary results of operations of ITO for the three months ended June 30, 2015 and 2014, respectively, are segregated and included in earnings from discontinued operations, net of tax, in the condensed consolidated statements of operations. The Company allocated interest expense associated with the $55 million repayment of Company indebtedness, required to comply with the existing credit agreement, to the ITO discontinued operating business. Allocated interest expense for the three months ended June 30, 2015 and 2014 was $0.3 million in each period, respectively.

The following is a reconciliation of the major classes of line items constituting earnings from discontinued operations, net of tax (dollars in thousands):

	For the Three Months ended June 30
	2015			2014
Major classes of line items constituting earnings from discontinued operations, net of tax:
Revenues	$	52,580		$	55,532
Cost of revenue	40,568			43,104

Gross profit	12,012			12,428

Operating expenses:
Sales and marketing	998			554
General and administrative	3,768			2,942
Gains, losses and other items, net	—			324

Total operating expenses	4,766			3,820

Income from discontinued operations	7,246			8,608

Interest expense	(564		)	(624		)
Other, net	(3		)	(306		)

Income from discontinued operations before income taxes	6,679			7,678
Income taxes	2,536			3,009

Earnings from discontinued operations, net of tax	$	4,143		$	4,669

The carrying amounts of the major classes of assets and liabilities of ITO are segregated and included in assets from discontinued operations and liabilities from discontinued operations in the condensed consolidated balance sheets. The following is a reconciliation of the major classes of assets and liabilities of the discontinued operations (dollars in thousands):

	June 30, 2015		March 31, 2015
Trade accounts receivable, net	$	31,497	$	35,743
Deferred income taxes	2,024		2,762
Other current assets	10,849		10,707
Property and equipment, net of accumulated depreciation and amortization	41,517		44,336
Goodwill	71,508		71,508
Purchased software licenses, net of accumulated amortization	4,763		3,943
Other assets, net	1,610		3,173

Assets from discontinued operations	$	163,768	$	172,172


Current installments of long-term debt	$	683	$	653
Trade accounts payable	4,731		8,857
Accrued expenses	7,661		7,480
Deferred revenue	2,222		3,658
Long-term debt	6,501		6,684
Deferred income taxes	22,390		22,716
Other liabilities	5,627		6,377

Liabilities from discontinued operations	$	49,815	$	56,425

U.K. call center operation

On May 30, 2014, the Company substantially completed the sale of its U.K. call center operation, 2Touch, to Parseq Ltd., a European business process outsourcing service provider. Some assets of the 2Touch operation were subject to a second closing, which occurred in March 2015, resulting in the complete disposal of the operation. The 2Touch business qualified for treatment as discontinued operations beginning in the first quarter of fiscal 2015. The results of operations, cash flows, and the balance sheet amounts pertaining to 2Touch have been classified as discontinued operations in the condensed consolidated financial statements.

Summary results of operations of the 2Touch business unit for the three months ended June 30, 2015 and 2014 are segregated and included in earnings from discontinued operations, net of tax, in the condensed consolidated statements of operations and are as follows (dollars in thousands):

	For the three months ended June 30
	2015		2014
Revenues	$	—	$	5,762


Earnings from discontinued operations before income taxes	$	—	$	343
Loss on sale of discontinued operations before income taxes	—		(1,875		)
Income taxes	—		—

Loss from discontinued operations, net of tax	$	—	$	(1,532	)

The carrying amounts of the major classes of assets and liabilities of the 2Touch business unit are segregated and included in assets from discontinued operations and liabilities from discontinued operations in the consolidated balance sheets and are as follows (dollars in thousands):

	June 30, 2015		March 31, 2015
Trade accounts receivable, net	$	—	$	112

Assets from discontinued operations	$	—	$	112


Other accrued expenses	$	949	$	1,008

Liabilities from discontinued operations	$	949	$	1,008